Candle Creations plans to open a new retail store in Old Town, Maine. The store will sell specialty candles for an average of $$40$ each. The average variable costs per candle are as follows:

Wax $$8$

Other additives $$3$

Base $$1$

The company is negotiating its lease for the new location. The landlord has offered two leasing options:

Option A$)$ a lease of $$3,000$ per month; or

Option B$)$ a monthly lease cost of $$1,500$ plus $10\%$ of the company's monthly sales revenue.

The company expects to sell approximately $275$ candles per month.

Requirement $1.$ Which lease option is more attractive for the company under its current sales expectations? Calculate the total lease cost under Option A and Option B$.$

Begin by identifying the formula to calculate the total costs.

Total variable expenses $($lease$)$

Total fixed expenses $($lease$)$

Total lease costs

$($Consider only the fixed and variable costs related to the lease options.$)$

The total lease cost under Option A is

$($Consider only the fixed and variable costs related to the lease options.$)$

The total lease cost under Option B is

Which lease option is more attractive for the company under its current sales expectations?

The lease option that is more attractive for the company under its current sales expectations is option B $,$ the fixed lease payment plus sales based commission because it results in the lowest total lease costs

Requirement $2.$ At what level of sales $($in units$)$ would the company be indifferent between the two lease options? Show your proof.

Begin by selecting the equation to determine the indifference point. $($Abbreviations used" $FC=$ Fixed costs, VCU$=V$ Variable costs per unit$)$

$($ VCU $(optionA)$ Units $)+FC($ option $A)=($ VCU $(optionB)$ Units $)+FC(optionB)$

The indifference point is candles.